Bernanke has apparently heard all of the opposition to his mega QE-2 plan, and he has changed the scope of QE-2 as a result. From the Journal today:
The central bank is likely to unveil a program of U.S. Treasury bond purchases worth a few hundred billion dollars over several months.
A few hundred billion? What happened to the $2 trillion that Goldman thinks might be the result? To prove that Bernanke is having second thoughts on a major expansion of QE he gave this quote to the WSJ:
Mr. Bernanke has used the analogy of a golfer with a new putter: Unsure how it will work, he finds best strategy is to tap lightly at first and keep tapping until the golfer figures out how best to use the putter.
A putter? Does Mr. Bernanke think this is a game he is playing? He is saying that he has never putted before, has no clue how to do it, so it it is best to tap lightly? What kind of monetary policy is that? "Learn as you go", does not make me feel that there is much hope.
I warned of a possible QE-2 Mini recently. The opposition to a broader program from other Fed members and the huge public outcry against currency manipulation (QE is currency manipulation) has forced Ben to back off.
The market will be very disappointed should we get a QE Mini. A program that says, “We’re going to buy 200b in two months and then see”, will do nothing favorable to the markets. I would argue that the markets could be sadly disappointed by this.
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